2025 (10) TMI 779 - SCH - Income Tax

Trust's interest-free secured loan to manager defeats charitable status; income taxable under s.2(15) and s.13(1)(c), appeal dismissed

SC upheld the HC's decision restoring the A.O. and Appellate Commissioner's orders that the trust's concession for an interest-free secured loan to its ... Exemption u/s 11 - charitable activity u/s 2(15) or not? - interest free secured loan given to the Manager - as decided by HC [2011 (8) TMI 805 - ALLAHABAD HIGH COURT] since interest was charged @10%, as alleged by the assessee, it should have been reflected in the books of accounts of the assessee as well as in the audit report but the same was not reflected in any document even subsequent document filed by the assessee except the resolution, which cannot be relied and it can be considered an afterthought - in view of clause (c) of Section 13(1) rendering the entire income of Trust or charitable institution on liable to tax even if only part of income is directed to be applied for the benefit of the specified persons - Decided against the assessee HELD THAT:- High Court was justified in interfering with the order of the ITAT, and thereby restoring the order of the Appellate Commissioner as well as that of the A.O. Hence, we do not find any reason to interfere in the present appeal. The exemption has been withdrawn in respect of the entire amount of tax to be paid. The said approach of the A.O. is not in accordance with law. Therefore, this Court may permit the appellant herein to make a representation before the Assessing Officer with regard to the quantum of tax to be paid by the appellant herein despite there being no interference on the merits of the present appeal.We do not propose to go into this aspect of the matter. We reserve liberty to the appellant herein to make a representation before the concerned Assessing Officer with regard to the actual tax to be paid by the appellant-assessee. The High Court was held justified in interfering with the ITAT and restoring the orders of the Appellate Commissioner and Assessing Officer; accordingly the civil appeal is dismissed on merits. The appellant contended the tax demand of Rs. 30,58,413 did not account for exemption limited to the portion under controversy (Rs. 3,25,000), and that withdrawal of exemption against the entire demand was 'not in accordance with law.' The Revenue maintained the AO was justified in demanding tax on the entire total income assessed (Rs. 60,75,280). The Court did not decide that substantive dispute, but granted the appellant liberty to make a representation to the concerned Assessing Officer regarding the actual tax payable. If such representation is made, 'the same shall be considered having regard to the facts of this case and in accordance with law.' A separate appeal was dismissed with identical liberty; pending applications disposed of.